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Glossary of Terms

Mortgage. Real Estate & Insurance

D

An update to the Preliminary Title Report/Title Commitment that reflects any changes to title since the original title report was prepared. Same as UPDATE ADDENDUM.

DD Form 13

Statement of Service document that may be issued when a veteran is still on active duty to verify military service.

DD Form 214

Report of Separation From Active Duty form for veterans separated after January 1, 1950.

Debt

Borrowed money, the repayment of which may be either secured or unsecured, with various possible repayment schedules.

DEBT CONSOLIDATION LOAN

A loan that combines debt obligations into one debt.

DEBT LOAD

The total amount of debt a customer currently owes.

DEBTOR

One who owes debt.

Debt-To-Income Ratios

Calculations that are used to determine if a borrower can qualify for a mortgage. These calculations include a monthly housing expense-to-income ratio and a total obligations-to-income ratio.

Deed-In-Lieu

Deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also known as a voluntary conveyance.

DEED OF RECONVEYANCE

A document used to transfer legal title from the trustee back to the borrower after a debt secured by a deed of trust has been paid in full.

Deed of Trust

Document used in place of a mortgage in some states. A type of security instrument conveying title in trust to a third party covering a particular piece of property. It is used to secure the payment of a Note. A conveyance of the title land to a trustee as collateral security for the payment of a debt, with the condition that the trustee shall reconvey the title upon the payment of the debt, and with power of the trustee to sell the land and pay the debt in the event the debtor defaults on the debt.

Deed Restriction

In a deed, limits or restricts the use of the land or real property.

Default

Breach or nonperformance of the terms of a Note or the covenants of a mortgage. Default It is the act performed by either the buyer or seller that breaches the contract of the sale and permits a claim for damages.

Defeasance Clause

Clause in a mortgage that gives the mortgagor the right to redeem property upon the payment to the mortgagee of the obligation due.

Deferred Maintenance

Physical depreciation or loss in value of a building or property resulting from maintenance functions not being performed in a timely way. Often referred to as curable physical depreciation.

Deferred Interest

Interest rate being added to principle balance due to making minimum payment which is less than interest only payment. Also called, Negative Amortization.

DELINQUENCY

Failure to make payments when due.

Deficiency Judgment

Court order to pay the balance owed on a loan if the proceeds from the sale of the security are insufficient to pay off the loan.

DEMAND

A letter from a lender showing the total amount due to pay off a mortgage or trust deed, inclusive of unpaid principal, interest, impound amounts, prepayment penalty, etc. Also, known as a Demand for Payoff Request or Beneficiaries Demand Letter.

DEMAND FEATURE

A feature that defines circumstances under which the remaining principal and interest amount of the loan is due and payable on demand.

Demand Note/Mortgage

Note of mortgage that the lender can call due at any time and without prior notice.

Deposit

Sum of money given to bind a sale of real estate, or assure payment or an advance of funds in the processing of a loan. Also known as earnest money.

Depreciation

Sum representing presumed loss in the value of a building or other real estate improvement resulting from age, physical wear, and economic or functional obsolescence that is deducted annually from net income to arrive at taxable income.

DEROG LETTER

A letter written by the borrower that explains any derogatory information or reporting on the credit report.

Description of Materials

Details of the type grade, and color of all building materials to be used in the construction of the home for an OTC loan. Can be presented on a standard HUD Form or in any format chosen by the builder/contractor.

Direct Costs (Hard Costs)

Construction costs that include labor and all building materials associated with the actual construction project. These costs are found on the builder/contractor line item budget.

Insurance that protects both a corporation and its key employees. The standard D & O policy usually includes corporate reimbursement, which covers expenses incurred by the directors and officers for legal costs and judgments indemnified by the corporation. Also included is personal coverage, which protects individual officers and directors against claims not indemnified.

DISBURSEMENTS

Payments made on behalf of the borrower pursuant to the instructions on the HID Settlement Statement.

Disbursement Schedule

A loan-specific schedule that is created as part of the Construction Loan Agreement signed at closing of an OTC loan. The schedule defines the percentage of construction funds that will be disbursed to the borrower(s) and/or builder/contractor at each draw request.

DISCHARGE

Following a completed bankruptcy proceeding, discharged debts are no longer enforceable. The customer has successfully completed the process and debtors are either paid in full or eliminated based on the plan.

Discharge Certificate

For veterans who were separated before January 1, 1950, the usual method of verifying military service is to present an honorable discharge certificate that shows the character of service and active duty dates. Other types of discharge for this time period were:

NAV PERS Form 553 (Naval Service)

WDAGO Form 53-98 (Army)

NAVMC Form 112PD (Marine Corps)

NAVCG Form 553 (U.S. Coast Guard)

Discount

In loan originations, the amount withheld from loan proceeds by a lender. In secondary market sales, the amount by which the sale price of a Note is less than its face value. In both instances, the purpose of a discount is to adjust the yield upward, either in lieu of interest or in addition to interest. The rate or amount of discount depends on money market conditions, the credit of the borrower, and the rate or terms of the Note.

Advancing of money, such as the periodic advancing of funds according to a schedule of payments in a construction loan agreement. Also known as advance, disbursement, payout, progress payment, or takedown.

Draw Request Form

A form submitted by the borrower(s) and/or builder/contractor to the Lender to request a disbursement of construction funds during the construction phase of an OTC loan.

Due-On-Encumbrance Provision

Covenant in the FNMA/FHLMC uniform multifamily mortgage that allows the mortgagee to call the mortgage due and payable if the mortgagor places a subordinate lien against the property without mortgagee approval. It also allows the mortgagee to increase the mortgage interest rate if the mortgagee approves the placement of a subordinate lien.

Due-On-Sale

Clause in a mortgage stating if the mortgagor sells, transfers, or in any way encumbers the property, the mortgagee has the right to implement the acceleration clause making the balance of the obligation due.

Duplex

Single structure designed with two separate housing/dwelling units.

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